(Bloomberg) -- Oil held losses after tumbling to the lowest level in more than six months, with investors weighing the prospect for rising Iranian supply as the outlook for global economic growth weakens.
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West Texas Intermediate traded near $87 a barrel after shedding more than 8% over the previous three sessions. Protracted talks over reviving a nuclear deal with Iran have progressed in recent days after the European Union circulated a final proposal to salvage the landmark accord. However, Goldman Sachs Group Inc. said an agreement was still unlikely in the short term.
"Sentiment in the market is still broadly negative with the prospect of an Iranian nuclear deal, while demand concerns continue to linger," said Warren Patterson, head of commodities strategy at ING Groep NV in Singapore.
The Biden administration is weighing Iran's response to the EU proposal, with officials on both sides of the Atlantic signaling the possibility that a deal could emerge after more than a year of false starts. While Goldman is skeptical, the investment bank said there could be a front-loaded increase of Iranian output by around 1 million barrels a day if an agreement is reached.
Additional supply could heap more pressure on prices as concerns over an economic slowdown cloud the demand outlook. Time spreads have narrowed significantly, signaling an easing of tight crude markets.
Oil is still up around 15% this year, and the International Energy Agency remains bullish on the outlook for demand growth as soaring natural gas prices spur greater use of crude. Sweden is the latest country to lean on oil-fired power in a bid to bring the cost of power production down.
Severe heat waves in China to Europe and the US are also straining power grids and hampering the delivery of commodities as rivers drop to low levels. Energy conservation advisories are surfacing as regions struggle to meet summer demand in what could be a prelude to an energy crisis during winter.
Meanwhile, the American Petroleum Institute reported crude inventories fell by 448,000 barrels last week, while gasoline stockpiles increased by more than 4 million barrels, according to a person familiar with the figures. Government data is due later Wednesday.
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